Why There’s Scope for Up to 2c/l More for April Milk

IFA National Dairy Chairman Sean O’Leary has said that historically high butter prices internationally, as well as more modest, but significant uplifts in the prices of other dairy commodities, have created a situation where Irish co-ops could return to farm gate milk price increases.

He said higher EU average market prices, five consecutive bullish GDT auctions, rising spots and futures have all created the conditions to allow for an April milk price lift of up to 2c/l for Irish farmers.

“Milk prices for Irish farmers have not increased since February, at which time EU returns, after deduction of a 5c/l processing cost, would have supported a farm gate price of 31.5 to 32c/l + VAT. Static Irish prices into April average out around 30c/l + VAT (31.6c/l including VAT), but EU returns at the end of May would support a farm gate price of 32.9c/l + VAT (34.7c/l including VAT),” he said.

“Italian dairy economics consultants CLAL this week published the prices of cream, butter and anhydrous milk fat (butteroil) in the main dairy regions – most at their highest levels in over five years. Butter prices in Oceania come in at €4659/t, in the US at €4640/t, in Germany at €5350 and in Italy at €4680,” Mr O’Leary said.

“The EU Milk Market Observatory has also reflected increased dairy prices, with butter up a whopping €210/tonne in the most recent week alone (24/05/17). Remarkably, all other dairy commodity prices have also been strengthening in recent weeks, with SMP up €100/t in the last month to €1,850, Cheddar up €130/t in the last two months, WMP up €170/t in the last four weeks and whey powder prices steadily up since late March, by a total of €80/t. The combined value of those returns for an Irish product mix would be, before a 5c/l processing cost is deducted, 37.9c/l – or 32.9c/l + VAT (34.7c/l including VAT) net of processing costs,” he added.

“Spot prices are also up, with German, Dutch and French butter averaging out €5,090/t and SMP €1,880/t, equivalent to a gross return of 39.43c/l, or a farm gate price equivalent of 34.43c/l + VAT,” he added. (See table below)

“Milk prices for Irish farmers have not increased since February, and we are clear that co-ops now have scope to increase the May milk price by up to 2c/l. The IFA National Dairy Committee will be lobbying co-op board members in the next couple of weeks to outline the case and press for this increase,” he concluded.